Ranked by Barclay Currency Trading Index as the second best performing stock fund manager in the world, Alex Smith knows more than most about what industries investors should be taking note of. Now the UK’s leading stock trader shares his insights on what areas of business are certain bets for 2014.
Those investing in the stock market are often faced with the difficult task of choosing growth industries from which to buy shares and equity. But when identified correctly, these growth industries can produce significant yields without too much work on the part of the trader.
The tricky part is identifying the growth industries in the first place. Since the financial crisis of 2008, many stock market investors have quite understandably become hesitant when it comes to backing a particular industry sector.
But as the global economic recovery gathers pace, there are certain industries emerging which are showing significant promise. If you’re stock trader looking for your next winning portfolio investment, look to buy equity from companies in the following sectors.
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1. UK Housing Developers
With the recent launch of the UK government’s ‘Help to Buy’ and ‘Funding for Lending’ schemes, there’s definite growth potential in housing developers. Simply because these policies are all geared to getting first-time buyers on the housing market.
To a certain extent, we’ve already seen the successful effects of these policies as UK house prices have started to rise, particularly around London. This is excellent news for housing developers, which have seen their profit margins increase as a result.
For example, analysts have estimated that a 2% increase in house prices will lead to a 13% increase in operating proﬁt for housing developer Persimmon Homes, assuming land prices stay at their current levels. This just gives a little perspective on the investment potential that can be found within these types of companies.
It’s also important to consider the dynamics of supply and demand in the housing market. Demand is substantially outweighing supply when it comes to new homes in the UK and output levels are still below pre-crash 2007 statistics.
So as the UK economic recovery continues, combined with the aforementioned government housing schemes, we can expect the output and profit margins of housing developers to continue to rise.
2. US Infrastructure Construction Companies
The US has huge potential, especially when it comes to infrastructure construction. Anyone who caught a glimpse of the 2012 US Presidential debates would have likely heard President Obama explain his vision of an American economy geared to building new roads, bridges and railways.
This vision is slowly becoming a reality as the US economic recovery continues and offers a great investment opportunity.
However, buying shares in the construction companies themselves is not what I would recommend here. Equity in the companies that hire construction equipment is really where stock market investors should go.
US construction businesses are in the midst of a structural shift from owning equipment to actually renting it for particular projects. This means American companies such as Ashtead, which supply equipment for most construction jobs, are seeing their profits rise quarter-on-quarter.
What’s better is that US infrastructure investment is still in its infancy. Many parts of the country are still need of improved transport and energy infrastructure. Meaning that companies such as Ashtead are only at the start of their growth curve.
3. UK Shale Gas Manufacturing Companies
In a similar way to how construction offers much promise in the US, the shale gas industry is one with plenty of potential in the UK and across the globe.
Although the US is the front-runner in the industry, it’s inevitable that the shale gas boom will spread into other places such as the UK, Europe and China.
The UK has some market leading component manufacturers that make up the machinery used in the drilling process for shale gas. A good example is Weir, a company that builds specialist pressure valves. Rotork in another, it makes actuators, which are parts used in drilling machinery.
The saying ‘those who buy a spade in a gold rush make the most money’ is certainly applicable here.
Making Money Work For You
Remember, the result of great investing is that your money works for you. The industries described above are really excellent opportunities for stock market traders that are likely to yield long-term profits.
Once your eyes are open to the potential of growth industries, it becomes much easier to spot other areas of business with similar promise.
Written on behalf of Alex Smith by PR99.